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Best Tips For Repairing Your Credit

If you’re looking for ways to repair your credit, you’re not alone.

According to the latest data report from the Federal Reserve Bank, Americans currently have over $804 billion dollars of outstanding debt.

What does that really mean? While some people keep their credit in check, others aren’t as fortunate. Struggles due to the pandemic or even just overspending can quickly lead to financial ruin.

But it’s not all bad news. Even if you’re behind on your payments and your credit history leaves something to be desired, there are ways to regain control of your debt. When you have a good credit score, it’s easier to obtain personal loans with lower interest rates. So, if you’re in the market to buy a house for the first time, you should absolutely prioritize improving your credit score.

With all this in mind, let’s take a look at six actionable steps you can take to repair your credit score and start to build credit today.

Check Your Credit Report

Your credit report says a lot about you. It shows how often you make late payments, what your credit limit is, how much available credit you have, how many credit accounts you have, your credit utilization ratio, your credit card balances, when the last time you opened a new credit card was, and more.

As such, it’s important to know if what’s being reported is accurate. Knowing your credit score gives you a general idea of your own creditworthiness.

However, that’s not always enough. You also need to review your credit reports to identify potential errors.

The first step is ordering a free copy of your annual credit report from a credit reporting agency. Why pay an annual fee for something that is free? To do this, request copies from all three major credit bureaus: Equifax, Experian, and TransUnion. You can also get a free credit report at

Once you obtain a copy of your credit report, analyze it to make sure everything checks out. If, for example, you see that your report reflects inaccurate information — like missed payments on personal loans when you actually paid your installments on time — you need to address the issue.

Believe it or not, credit-reporting errors are common. In fact, approximately 34% of Americans find at least one error on their credit reports, according to a Consumer Reports investigation.

Once you receive them, go over your credit file with a fine-tooth comb. Make sure your personal information is correct — like your name, address, and Social Security number. If it isn’t, update it immediately.

While having the wrong birth date or incorrect spelling of your name doesn’t affect your credit, it can make verifying your identity for future loans difficult. It can also make it hard to open new accounts.

Look at each account you listed on your reports. Verify that your payments are being reported correctly and on time. You should also verify that all of your accounts are open and haven’t been closed without consent. If you have any negative marks on your report, make sure they are legitimate.

It’s almost important to check your hard and soft credit inquiries. Hard inquiries are inquiries that can impact your credit score. These appear on your report whenever you apply for a credit card or loan, like a mortgage. They can drop your score by several points for some time, so you need to keep those to a minimum.

Soft inquiries, on the other hand, don’t impact your credit score. These are usually done to prequalify you for credit line increases and new credit offers.

If you do find any errors, you need to file a dispute. All three bureaus offer online dispute options to file your claim. Unfortunately, it can take up to 30 days to investigate and remove any errors from your report. Patience is a virtue, as they say.

During this process, a bureau might say that the reporting is correct. Be sure to submit any supporting documentation you have to avoid any complicated disputes.

2. Set up credit monitoring

Credit monitoring can also help you repair your credit. If you’re interested in keeping real-time tabs on your FICO score, there are a lot of services to choose from, all of which offer various levels of protection. Some of the most popular free providers include Experian BoostCredit Karma, and Credit Wise by Capital One. Depending on your specific credit needs, there might also be more comprehensive paid versions of the service.

In addition to helping you stay on top of your accounts and improve your debt management skills, monitoring your accounts can help you avoid identity theft — or at least detect that you were a victim of a scam immediately after it occurs.

3. Use debt consolidation services

If you have a low credit score or errors on your report, debt consolidation services can help. These companies will work on your behalf to help improve your score and consolidate your debt.

However, with so many credit repair companies claiming to be the best, it might be tough to determine which are legitimate. To make your decision easier, some of the best debt consolidation companies include:

All three of the above-mentioned companies offer credit repair services and debt consolidation loans. It’s important to note that credit repair is not the same as hiring a credit counselor, who simply provides you with tips to manage your finances.

Credit repair services, on the other hand, create repayment plans with creditors, help remove errors on your credit reports, and ultimately help you qualify for home loans or new lines of credit.

It’s worth noting that, under the Credit Repair Organizations Act, the Federal Trade Commission (FTC) prohibits credit repair services from asking for advance payments. So, if you need credit repair services, don’t shy away thinking you will have to pay up ahead of time.

4. Pay on time

Even if you can only afford the monthly minimum payment, always strive to pay your credit card and student loan bills on time. Your payment history accounts for 35% of your total credit score, so paying on time can make a huge difference in your personal finance situation, helping you avoid a poor credit score.

If possible, consider setting up all of your accounts on autopay. That way, you’ll never miss a payment. If you go this route, however, you need to make sure you have enough funds to cover costs each month.

If that’s not an option, you can always set up payment through your bank and have a certain amount transferred with bill pay. Most banks offer this service, so it’s just a matter of configuring the transfer.

5. Lower your credit utilization score

Even though paying with credit is convenient, doing so too often can also lower your score, resulting in bad credit.

At a high level, your credit utilization score is what lenders use to gauge your spending habits. Ratios less than 30% but more than 0% are considered excellent. If your utilization is higher than that, it’s negative information that credit card issuers will use to potentially deny your application.

Optimizing your utilization rate is as simple as using less while paying more. You can improve your score by paying in cash and trying to pay more than the minimum payment due each month.

6. Pay off debt

There are two kinds of debt: good debt and bad debt. Good debt has the power to make you money in the long run, like your mortgage. As you pay off your mortgage, you build equity in your home.

Your car payment and material goods are examples of bad debt. Their value depreciates over time and, in most cases, you never recoup the money you originally spent.

Credit card debt is another example of bad debt. While building good credit is important, it’s also possible to have too much credit if you’re not good at managing your money. You might be approved for numerous lines of credit, but what good is it if you can’t pay them off?

To get things going in the right direction and start paying off your debt, you can use the snowball or debt avalanche method.

The snowball method focuses on the smallest balances first. To get started, make a list of all your outstanding student loan, auto, home, and credit card debt. After you make the minimum monthly payment, take any extra money you have and put it toward paying off your smallest account first.

Your goal is to pay off the balance, not the interest. Once you pay it off in full, move on to the next account, and so on.

The debt avalanche method works the same but in the opposite way. Focus on the largest debt first and work your way down to the smallest. Any extra money you have goes towards the principal, not interest.

Wrapping things up

At the end of the day, having a solid credit score makes life easier.

If you’re struggling with bad or fair credit, take comfort in the fact that you’re not alone. And keep in mind that this post doesn’t explore every single thing you can do to improve your credit. For example, if you’re not good at using credit cards, you may consider applying for a secured credit card that you fund ahead of time to get used to using cards to buy things.

Ultimately, you need to know that repairing your credit is possible. All it takes is a solid strategy and the desire to make it happen.

But once you start seeing success, it’ll motivate you to do even more. Before you know it, you’ll be living the good life — free of bad debt with an exemplary credit score that helps you achieve your dreams of homeownership before you know it.